XPO logistics reports strong Q4 earnings results

Fourth quarter and full-year 2020 earnings results issued late yesterday by XPO Logistics, a Greenwich, Conn.-based provider of global freight transportation and logistics services, continued to point in the right direction.

Quarterly revenue—at $4.7 billion—was up 13% annually, setting a record for the company, and operating income—at $228 million—was up 11%. EBITDA—at $449 million—topped Wall Street estimates by 10%, or $42 million, for its fourth-best quarter ever.

“Our fourth quarter revenue, earnings and free cash flow were all much better than expected,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics, in a statement. “The investments we made in our people and technology in 2020 helped us to generate the highest revenue of any quarter in our history. We also doubled our truck brokerage net revenue year-over-year, and we improved our fourth quarter LTL adjusted operating ratio, excluding real estate gains, for the sixth straight year. The industry’s biggest tailwinds are at our back in 2021 — e-commerce fulfillment and returns, supply chain outsourcing and fast-growing customer demand for our digital capabilities. Our 2021 guidance anticipates adjusted EBITDA of $1.725 billion to $1.8 billion, reflecting year-over-year growth of 24% to 29% in each of our segments.”

Quarterly XPO performance metrics:

• total transportation revenue, at $2.94 billion, was up 12% annually, and the North American LTL group’s operating ratio, at 84.9% and the LTL adjusted operating ratio was 83.0%, with North American truck brokerage revenue, which coupled with LTL revenue comprises more than 90% of the company’s transportation profits, was up 76% annually, to $616 million, with loads per day up 26%, new revenue per load up 67%, and loads per day up 26%; and
• logistics revenue, at $1.76 billion, topped the $1.56 billion reported for the same period a year ago, with XPO pointing to logistics revenue growth being paced by strong demand from e-commerce and other consumer related verticals, which were partially offset by COVID-related impacts

And for all of 2020, total revenue came in at $16.25 billion, down 2.5% annually, with operating income—at $391 million—down from 2019’s $821 million. Full-year adjusted EBITDA was $1.4 billion, down from 2019’s $1.7 billion. In its 2021 guidance, XPO is pegging adjusted EBITA to be between $1.725 billion to $1.8 billion, up 24%-to-29% annually.

In regards to its December 2020 announcement that XPO plans to seek a spin-off of its logistics group as a standalone publicly traded company and would be split into two separate publicly-traded companies on the New York Stock Exchange—XPORemainCo, a global provider of less-than-truckload (LTL) and truck brokerage transportation services; and NewCo, which would become the second-largest global contract logistics provider, with around 200 million square feet of warehouse space—the company reiterated that there can be no reassurance that a spin-off will occur, or, if one does occur, of its terms or timing.

As a company that has seen exponential growth through various acquisitions, Jacobs noted at the SMC3 2021 JumpStart conference in January that future acquisitions could occur, once XPO completes the spin-off of its contact logistics group and less-than-truckload/truck brokerage services into separate companies. Jacobs said at the time of this announcement that by uncoupling its transportation and logistics segments, XPO intends to create two high-performing, pure-play companies to serve the best interests of all its stakeholders.

Cowen analyst Jason Seidl commented in a research note that XPO remains well positioned to benefit from e-commerce tailwinds, technology initiatives and its planned 2H spin-off.